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What Can Global Firms Do to Reduce Vulnerability to Financial Crisis

In: Business and Management

Submitted By sagarforevr
Words 342
Pages 2
Question 3: What can global firms do to reduce vulnerability to financial crisis?
By definition, financial crisis is applied broadly to a variety of situations in which some financial assets suddenly lose a large part of their nominal value. (Wikipedia) It would become extremely harmful to global organizations. Some international firms suffer a great amount of loss or even go bankrupt during financial recession. Therefore, whenever there is a financial crisis, global companies have to execute certain initiatives in order to reduce vulnerability to financial crisis.
During financial recession, there are mainly two kinds of crisis management: short-term and long-term orientations. The main purpose of short-term initiatives is to maximize year-to-year profit (or minimize loss), whereas long-term initiatives focus on the benefits of future gains and ignore short-term loss. (Kotabe, 2010) Therefore, short-term oriented solutions tend to satisfy stockholders’ immediate needs, while long-term orientation is more beneficial toward customers. (Vinay Couto, 2009)
Among short-term initiatives, pull-out of the market, across-the-board cuts, layoffs, aggressive working capital management, and discretionary spend reductions are very common responses for financial crisis. In general, global companies could create significant outcomes within very short period with those short-term orientations. Therefore, most of global companies choose short-term responses to reduce vulnerability to financial recession. (Vinay Couto, 2009)
On the other hand, long-term initiatives put more emphasis on approaches to address the consumer needs completely changed during the recession. Long-term orientations tend to modify marketing strategies in various ways. Long-term initiatives include strategic acquisitions, product and service development, offshoring, insourcing, expansion

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